It is not only in Singapore, the US, the UK, and other developed economies where accountants have come under the spotlight recently. Deloitte is facing a lawsuit in Shanghai over “alleged failure to alert investors to a client’s worrisome finances”, according to a report.
It is also understood that the China Securities Regulatory Commission (CSRC) may hold an administrative hearing on April 7 in relation to the firm’s role in a 2005 scandal involving their former client, Guangdong Kelon Electrical Holdings Co. (in an all-too-familiar tale of inflated sales and embezzlement).
If the court action proceeds, it will be the first investor-led lawsuit against an accounting firm in China, and will be based on the fact that new laws require securities service institutions to investigate the truth of information they receive about listed firms.
Deloitte is quoted as saying:
- “We are confident that our audit of Kelon adhered in all material respects to the audit standards of China and those of Deloitte…In fact, in this case, we were one of the victims of the fraud carried out by a number of parties both inside and outside the company”.
It is good to see that China is no different from anywhere else in this regard and that, whatever the merits of the case, Chinese investors are starting to use the courts to protect their interests. This can only be good news for the development of corporate governance, and also points to increased confidence in the legal system – though the people at Deloitte may not see the positive side…
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Deloitte faces double trouble in ChinaChina Daily – China
By Zhang Ran (China Daily). Accounting firm Deloitte, facing a lawsuit in Shanghai and administrative hearing in Beijing over its …